Chiara Scotti: Financial Stability and Regulation in an Age of Transformation - How Economic Research Can Help Reorient Navigation

Why It Matters

Understanding the new digital and non‑bank driven financial ecosystem is essential for central banks to design effective policy tools and safeguard stability, while avoiding blind spots that could amplify systemic risk.

Key Takeaways

• Deposit flows varied during 2023 banking turmoil.
• Digitalization enables instant fund transfers across institutions.
• Non‑bank intermediaries now dominate risk distribution.
• Traditional models may miss modern transmission channels.
• Research guides robust regulation amid financial transformation.

Pulse Analysis

The financial sector is undergoing a digital overhaul that reshapes how deposits move and how risk is allocated. Instant, 24/7 fund transfers across banks and fintech platforms have eroded the traditional friction that once insulated institutions from one another. This fluidity amplified the divergent deposit patterns observed during the 2023 turbulence, prompting regulators to reconsider the assumptions embedded in legacy balance‑sheet models. By acknowledging the speed and reach of modern payment rails, policymakers can better anticipate liquidity shocks before they cascade.

Non‑bank intermediaries—such as asset managers, shadow banks, and crypto‑focused entities—now play a pivotal role in channeling capital and distributing risk. Their rapid growth challenges conventional monetary‑policy transmission, especially when interest‑rate moves alter the valuation of large securities portfolios held outside traditional banks. As these entities operate with lighter regulatory oversight, the potential for hidden vulnerabilities rises, making it crucial for central banks to map these new transmission pathways. Integrating data from alternative finance sources can illuminate hidden exposures and improve macro‑prudential surveillance.

Economic research becomes the compass for navigating this complexity. Empirical studies that separate structural shifts from cyclical noise help identify which policy levers remain effective and where new tools are needed. Institutions like Banca d'Italia, by fostering rigorous academic collaboration, can develop forward‑looking frameworks that accommodate digital innovation while preserving stability. In an era where financial intermediation is increasingly borderless and technology‑driven, evidence‑based regulation will be the linchpin of resilient markets.